Budgeting Guidance for New Homeowners
There’s a reason why buying a new home is often considered to be one of the most stressful life events a person can face. Although it’s exciting to start your new journey with an incredible property of your own, there are also a lot of things that you’ll need to deal with when you finish signing off on your home loan and unpacking your boxes.
One of the most important things you can do when you’re moving into a new property is to make sure that you’ve considered your new budgetary needs. The chances are that your finances are going to be different going forward, so make sure you keep the following advice in mind.
- Get to Terms with Budgeting Basics
A budget can be as complicated or as simple as you want it to be. On a basic level, all you need to know is how much money you’re going to have coming in, and how much you’re going to be spending on things like bills, food, house insurance and more. Don’t forget to consider any loans you have too. Some of the things you’ll need to budget for include:
- Homeowners insurance and real-estate taxes
- Mortgage payments
- Home maintenance and upkeep
You might also want to save some money aside for potential decorating and extension projects later down the line. This needs to be a separate savings account to the money you save for emergencies.
- Make Careful Decisions about Big Projects
Remember that even if you’ve found the perfect home for you, there’s a chance that there may need to be some work done to it. For instance, your property might be fantastic, but you may decide that you want to get some extra space with an extension. If you choose to take this route, you might not have enough cash to pay for everything up front, which means you’re going to need a loan.
When considering your loan options, make sure that you pay close attention to all the different opportunities you have to borrow money. There are many different loan providers out there and comparing your options carefully will help you to find the one with the lowest interest rates and fees.
- Think About your Savings
Up until recently, there’s a good chance that a lot of your savings went towards expenses for your home, like finding enough money for a deposit. However, now that you’ve got the property of your dreams, the last thing you want to do is forget all about your savings. For instance, you’re going to need an emergency fund that you can rely on in case anything goes wrong in your life.
If you suddenly lose your job, a savings fund with 6 months of income in it will ensure that you can still pay your mortgage and other home-running expenses until you find a new source of employment. Additionally, this account will help you to pay for things like leaks or broken appliances without dipping into other money.
- Pay for Debts before Mortgage Payments
When you’re a new homeowner, and you get a raise at work, it’s tempting to cut down the length of your mortgage by looking into making additional payments. However, you might be better off paying off other debts first. Your mortgage is one of the best obligations you can have, and if you keep remortgaging with new lenders, you should be able to get a pretty good deal on your interest rates.
However, other debts, like credit card expenses and loans, can really weigh down your finances over time. With that in mind, it’s essential to make sure that you always consider paying off your other debts before you focus on your mortgage. If you end up debt free, you can always consider spending more on your mortgage then.
- Deal with Issues Proactively
Finally, no matter how cautious you are with your money, there’s always a chance that something could go wrong and leave you with serious financial problems to face. If you’re worried that you might not be able to make your mortgage repayment one month, the best thing you can do is be proactive and start planning a solution as early as possible.
For instance, you might be able to refinance your mortgage at a lower interest rate to save some extra cash if you anticipate there being issues ahead. This could mean ending up with a longer mortgage term, but that might be worth the risk for you right now.